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SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-K

| | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| | ------------------------------------------------------------------------------------

For the Fiscal Year Ended December 31, 2001

Commission File Number 000-23213

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YOUNG INNOVATIONS, INC.(Exact Name of Registrant as Specified in its Charter)

Missouri

43-1718931(State of Incorporation)

(I.R.S. Employer Identification No.)13705 Shoreline Court East,

63045Earth City, Missouri(Address of Principal Executive Offices)

(Zip Code)


Registrant's telephone number, including area code:(314) 344-0010

Securities Registered Pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.01 par value per share(Title of Class)

Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes ý    No o

Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of
Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K    ý

The
aggregate market value of the Registrant's Common Stock held by non-affiliates of the Registrant on February 28, 2002 (based on the closing sale price of $18.83 of
the Registrant's Common Stock, as reported on the Nasdaq National Market on such date) was approximately $74,363,888.

Number
of shares outstanding of the Registrant's Common Stock at February 28, 2002:

8,805,514
shares of Common Stock, par value $.01 per share

ALL
SHARE AND PER SHARE NUMBERS SET FORTH ABOVE GIVE EFFECT TO THE THREE-FOR-TWO STOCK SPLIT EFFECTIVE ON MARCH 28, 2002 FOR HOLDERS OF RECORD AS OF THE CLOSE OF BUSINESS ON
MARCH 22, 2002.

Portions
of the Registrant's definitive Proxy Statement to be filed for its 2002 Annual Meeting of Stockholders are incorporated by reference into Part III of this Report.

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FORWARD LOOKING STATEMENT

This Annual Report (including, without limitation, Item 1"Business" and Item 7"Management's Discussion and Analysis of Financial
Condition and Results of Operations") includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements other than statements of historical facts included herein are "forward-looking statements."
Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. Forward
looking statements include statements which are predictive in nature, which depend upon or refer to future events or conditions and which include words such as "expects", "anticipates", "intends",
"plans", "believes", "estimates", or similar expressions. These statements are not guaranties of future performance and the Company makes no commitment to update or disclose any revisions to
forward-looking statements, or any facts, events or circumstances after the date hereof that may bear upon forward-looking statements. Because such statements involve risks and uncertainties, actual
actions and strategies and the timing and expected results thereof may differ materially from those expressed or implied by such forward-looking statements. These risks and uncertainties include, but
are not limited to, those disclosed in this Annual Report and other reports filed with the Securities and Exchange Commission.

Forward-looking
statements involve risk, uncertainty, and their ultimate validity is affected by a number of factors, both specific and general. Specific risk factors may be noted along
with the statement itself. However, other more general risks and uncertainties which are inherent in any forward-looking statement include, but are not
necessarily limited to changes in:



Demand for the Company's products

Relationships with strategic customers, suppliers and product distributors

Competition in each of the Company's product lines

Dependence on and consolidation of distributors

Successful integration of acquisitions

Ability to manage our growth

Availability of acquisition candidates and the need for additional capital

Technological change resulting in product obsolescence; dependence on new products

Government regulation

Concentration of suppliers

General economic conditions

Operational capabilities due to natural disasters or other similar unforeseen events


This listing of factors is NOT intended to include ALL potential risk factors.The Company makes no commitment to
update these factors or to revise any forward-looking statements for events or circumstances occurring after the statement is issued.

At
any time when the Company makes forward-looking statements, it desires to take advantage of the "safe harbor"which is afforded such statements under the Private Securities Litigation Reform Act of
1995.

2

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PART I

Item 1. Business.

Young Innovations, Inc. and subsidiaries (the "Company") develops, manufactures and markets supplies and equipment used by dentists, dental hygienists,
dental assistants and consumers. The Company's product offering includes disposable and metal prophy angles, prophy cups and brushes, panoramic x-ray machines, dental handpieces (drills)
and related components, orthodontic toothbrushes, flavored examination gloves, children's toothbrushes, children's toothpastes, moisture control and infection control products. The Company's
manufacturing and distribution facilities are located in Missouri, California, Indiana, Colorado, Tennessee and Texas.

The
Company was incorporated in July 1995. The Company acquired The Lorvic Corporation ("Lorvic") in May 1995, adding a new line of infection control products as well as
chemical engineering and manufacturing expertise. In July 1996, the Company acquired Denticator International, Inc. ("Denticator") and its line of popular low-cost disposable
prophylaxis angles to complement Young Dental's premium-priced disposable angles. In February 1998, the Company acquired Panoramic Corporation ("Panoramic"), a leading manufacturer and marketer
of X-ray equipment sold or rented to dental professionals in the United States. In April 1999, the Company acquired Athena Technology, Inc. ("Athena"), which added a line of
dental handpieces and related components to the Company's product lines. In June 2000, the Company acquired substantially all of the assets of Plak Smacker, Inc, ("Plak Smacker"), which added a
line of orthodontic toothbrushes, children's toothbrushes, flavored examination gloves, and children's toothpastes to the Company's product line. In June 2001, the
Company acquired substantially all of the assets of the Biotrol and Challenge subsidiaries of Pro-Dex, Inc. (collectively, "Biotrol"), which significantly strengthened the Company's
infection control and preventive product offerings.

Young
Dental was founded in the early 1900's. As one of many small suppliers to the dental profession, Young Dental's strength was manufacturing consistently reliable dental products. As
dentistry evolved, Young Dental's employees worked with practicing dentists and academics to identify clinical problems. Young Dental staff used their engineering and manufacturing expertise to create
solutions to those problems. The Company believes that decades of providing innovative products to meet the evolving needs of the dental profession have earned the Company a strong reputation for
quality, reliability and value.

The
Company markets its products primarily in the United States. The Company also markets its products in several international markets, including Canada, Europe, South America, Central
America and the Pacific Rim. International sales represented less than 10% of the Company's total net sales in 2001.

The
Company is a Missouri corporation with its principal executive office located at 13705 Shoreline Court East, Earth City, Missouri 63045, in the St. Louis, Missouri metropolitan area;
its telephone number is (314) 344-0010.

See
Item 8. Financial Statements and Supplementary Data for financial information about the professional dental and retail segments of the Company's business.

Recent Developments

On March 12, 2002, the Board of Directors declared a three-for-two stock split of the Company's Common Stock in the form of a stock
dividend payable on March 28, 2002 to shareholders of record as of the close of business on March 22, 2002. All share and per share numbers in this Report give effect to such stock
split.

Products

The Company markets disposable and metal prophy angles as well as prophy cups, brushes and pastes (collectively, "Prophy Products"), fluorides, infection control
products, dental X-ray equipment,

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dental handpieces and related components, orthodontic brushes and supplies, flavored examination gloves, children's toothbrushes and toothpastes and other products.

Prophy Products.The Company believes it manufactures and sells the broadest line of prophy products in the domestic
professional dental products market. The Company is able to achieve its substantial share of this market by providing prophy products at both premium and popular prices. The Company generally prices
its Young branded prophy products at premium levels and its Denticator branded prophy products at lower price levels. The Company's broad range of prophy products enables it to be a single-source
supplier to its distributors.

Prophy
products consist of three components: 1) an angle which is attached to and extends from a standard, low-speed dental handpiece, 2) a rubber cup or brush
which is attached to the angle and performs the cleaning function and 3) an abrasive paste normally applied to the patient's teeth with the cup or brush. During the prophylaxis process, the cup
or brush is filled with abrasive paste, which is applied to the teeth as the prophy cup rotates. The dental professional polishes both the visible portion of the tooth and the subgingival portion
(below the gum line). The Company's prophy products include several configurations of metal autoclavable prophy angles, single-use disposable plastic prophy angles and several flavors and
consistencies of pastes. Prophy cups and brushes, which are paired with metal prophy angles, are sold as single-use items. Disposable prophy angles are sold as assembled units with a cup
or brush already attached. The Company produces and markets a number of different disposable prophy angles, including both traditional right angle and contra angle configurations. Virtually all of the
Company's metal prophy angles are sealed against penetration of matter from patients' mouths (thus reducing the risk of cross-contamination and damage to the prophy angle) and are designed for easy
maintenance. Because such metal prophy angles function optimally only when used with the Company's cups and brushes, most dentists who purchase the Company's metal prophy angles also purchase the
Company's cups and brushes.

Other Preventive Products.The Company's other preventive products include fluorides used in dental offices and at home to
reduce cavities and tooth sensitivity; applicators used by dental professionals to apply fluoride to patients' teeth; and plaque disclosants, which are liquids or tablets that identify the presence of
plaque when applied to tooth surfaces.

Infection Control Products.The Company's line of infection control products includes products such as surface disinfectants,
cleaners, sterilizing solutions, indicator tape and tabs used to verify the effectiveness of a sterilizer, Nyclave wrap used to wrap instruments during sterilization so that sterility is maintained
until use, barrier products used to wrap operatory knobs, handles and other devices that cannot be sterilized, and surgical milk and instrument care products used to inhibit corrosion, remove rust and
lubricate hinged instruments in connection with the autoclave process (sterilization through the use of steam).

X-Ray Equipment.The Company markets a line of dental X-ray equipment under the Panoramic brand name.
Panoramic's PC-1000 X-ray machine produces a high quality image of the entire dental arch in one X-ray film. Panoramic X-rays present an anatomical
assessment of the entire oral cavity and surrounding structures. The Company believes this allows a dentist to more accurately diagnose and treat the patient, providing better overall care.
Panoramic's PC-1000/Laser 1000 cephalometric X-ray system allows analysis of the exact relationship of various anatomical reference points of the patient's anterior skull
profile. General dentists and orthodontists use these calculations to locate and predict the movement of teeth in order to fit braces and other orthodontia. The device is used by oral surgeons to
detect pathology and also to determine bone and teeth alignment before and after surgery.

Handpieces and Components.The Company manufactures and markets a line of high-speed and low-speed
dental handpieces. The Company also offers high-speed and low-speed handpiece repair services. High-speed handpieces, commonly referred to as dental drills, are
used in a variety of operative and restorative dental procedures. Low-speed handpieces are used by dentists and dental hygienists in the teeth cleaning, or prophylaxis procedure.
Prophylaxis angles, such as the disposable or

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autoclavable prophylaxis angles sold by the Company, attach to a low-speed handpiece, which provides drive power for the angle. Low-speed handpieces are also used in certain
operative and restorative dental procedures, though to a lesser extent than high-speed handpieces. The Company's handpieces are sold under the Athena Champion brand name, as well as
through private label agreements with certain dental distributors.

Orthodontic and Children's Homecare Products.The Company markets a line of orthodontic brushes, flavored examination gloves,
children's toothbrushes and toothpastes, and miscellaneous supplies.

Assisting and Other Products.The Company's assisting and other products include disposable aspiration products used to
remove blood, saliva and other matter during dental procedures; cotton roll substitutes used to control saliva and moisture during dental procedures; matrix bands used for tooth restorations; rubber
dam frames used to isolate teeth during dental procedures; and etching gels and bonding prep used to condition tooth surfaces for bonding.

Private Label and Original Equipment Manufactured (OEM) Products.In addition to branded products, the Company designs,
develops and produces a limited number of private label and OEM products for dental distributors and other professional dental product manufacturers.

Marketing and Distribution

The Company markets its prophy, preventive, infection control and handpiece products to dental professionals worldwide primarily through a network of dental
product distributors. The Company actively supports its distributor relationships with Company sales personnel and independent sales representatives in the United States, independent sales
representatives in Canada and Mexico and sales representatives in countries outside of North America.

The
Company also uses non-exclusive distributors to service markets in a number of other countries. All major distributors of dental products in North America sell the
Company's products, including Henry Schein, Inc. and Patterson Dental Company, which accounted for 14.6%, and 13.3% respectively, of the Company's sales in 2001. The Company has no formal
agreements with its distributors. They generally purchase products from the Company by purchase order. The Company believes these arrangements are customary in the industry. In addition to marketing
through distributors in the United States, the
Company sells products directly to dental and dental hygiene schools, Veterans Administration healthcare facilities and United States military bases.

The
Company expends considerable effort educating its distributors about the quality, reliability and features of its products. The Company also advertises its products through industry
publications and direct mail. To supplement its other marketing efforts, the Company provides product samples to dental professionals and exhibits its products at industry trade shows. In addition,
the Company seeks to stimulate interest in its products by providing information and marketing materials to influential lecturers and prominent experts and consultants in the dental industry.

The
Company's panoramic X-ray products are marketed in the United States and Canada directly to the end user, primarily by direct mail, trade shows and a limited amount of
advertising in trade and professional journals. Panoramic also utilizes distributors to market its products in a number of other countries.

The
Company's orthodontic kits and related supplies and flavored examination gloves are sold directly to orthodontists and dentists. Children's homecare products are marketed directly to
dental professionals and government programs, as well as through retail mass merchandisers.

Product Development

The Company's engineers and chemists are focused on developing innovative professional dental products and are actively involved in improving the Company's
manufacturing processes. Frequently,

5

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these products are designed and developed in response to needs articulated to the Company by dental professionals. For example, the Company designed a short prophy cup for its line of prophy angles
to allow for easier access to the back of the patient's mouth. Many of the new products or product improvements developed by the Company are patented.

Manufacturing and Supply

The Company manufactures most of its products and product components other than X-ray equipment, certain infection control products, children's
homecare products, orthodontic kits and related supplies, and flavored examination gloves.

Prophy and Other Products.The Company uses a variety of computer numerically controlled machining centers, injection molding
machines and robotic assembly machines and continues to invest in new and more efficient equipment and production lines. The primary processes involved in manufacturing the
Company's products consist of precision metal turning and milling, rubber molding, plastic injection molding, component parts assembling and finished goods packaging. The Company has a
one-third interest in International Assembly Inc. ("IAI"), a contract manufacturer located in Mexico that assembles a portion of its disposable prophy angles.

Pastes, Liquids and Gels.The Company blends and mixes all of its pastes, liquids and gels at the Louisville, Colorado, Earth
City, Missouri, and Brownsville, Texas, facilities. The Company owns equipment used to form and dye-cut expanded polyethylene foam and to dye-cut extruded plastic into finished
products and equipment used to package its products in a variety of container sizes, including prophy paste in unit-dose containers.

Infection Control Products.The Company manufactures a variety of infection control products, sterilants and cleaners, at the
Louisville, Colorado and Earth City, Missouri facilities. Additionally, certain of the Company's infection control products are sourced from domestic manufacturers.

X-Ray Equipment.X-ray equipment is manufactured and assembled by a contract manufacturer at the
Company's premises in Fort Wayne, Indiana. The contract manufacturer supplies labor, purchases most components and performs administrative and logistical functions associated with the production of
the machines. The Company owns all of the tooling, engineering documentation and assembly fixtures used in the process. The Company manufactures its own X-ray generators.

Handpieces and Components.The Company uses a variety of computer numerically controlled machines to manufacture a number of
the components required to produce its high-speed and low-speed handpieces. Certain other handpiece component parts are sourced from a variety of OEMs. The Company
assembles and provides repair services for its handpieces, and offers repair services for a number of other handpiece brands.

Orthodontic and Children's Homecare Products.The Company sources most of its orthodontic, children's homecare products, and
flavored examination gloves from manufacturers in Asia, principally China and Malaysia. Certain other toothbrush and toothpaste products are sourced from domestic manufacturers.

Supply.The Company purchases a wide variety of raw materials, including bar steel, brass, rubber and plastic resins from
numerous suppliers. The majority of the Company's purchases are commodities readily available at competitive prices. The Company also purchases certain additional miscellaneous products from other
manufacturers for resale.

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Competition

The Company competes with manufacturers of both branded and private label dental products in its product offerings. The Company believes it is the leading
manufacturer of prophy angles and surface disinfectants used in the professional dental market in the United States. The Company also believes it is the leading distributor of panoramic
X-ray machines in the United States.

The
markets for the Company's products are highly competitive. The Company believes that the principal competitive factors in all of its markets are product features, reliability, name
recognition, established distribution network, customer service and, to a lesser extent, price. The relative speed with which the Company can develop, complete testing, obtain regulatory approval and
sell commercial quantities of new products is also an important competitive factor. Some of the Company's competitors have greater financial, research, manufacturing and marketing resources than the
Company and include DENTSPLY International, Inc., Sybron Dental Specialties, Oral-B Laboratories, StarDental, a division of DentalEZ Group, KaVo America, Proctor and Gamble Co.,
Colgate-Palmolive Co., and Planmeca OY.

Employees

As of December 31, 2001, the Company employed approximately 270 people, none of whom were covered by collective bargaining agreements. The Company believes
that its relations with its employees are good.

Executive Officers of the Registrant

The executive officers of the Company, their ages and their positions with the Company are set forth below. All officers serve at the pleasure of the board.

|Name               |  | Age |  | Position                                        |  | Principal Occupation During Past 5 Years                                                                                                                                                                                                                                                                                                                                                                                      
|------------------ |  | --- |  | ----------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|George E. Richmond |  | 68  |  | Chairman of the Board and Director              |  | Chairman of the Board since 1997, Chief Executive Officer from 1995 to 2002, Director of the Company since its organization in 1995, President of Young Dental Manufacturing Company ("Young Dental") (predecessor to the Company) from 1961 until
1997.                                                                                                                                                                      
|Alfred E. Brennan  |  | 49  |  | President, Chief Executive Officer and Director |  | President since July 1998, Chief Operating Officer of the Company since October 1997, Chief Executive Officer since January 2002 and Director of the Company since August 1997. Senior Associate of Dewar Sloan, a management consulting company, from
1995 until October 1997. President of the Dental Instrument Division of DENTSPLY International, Inc, a manufacturer of dental supplies and equipment from 1991 to 1994.
|                   |  |     |  |                                                 |  |                                                                                                                                                                                                                                                                                                                                                                                                                               

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|Arthur L. Herbst, Jr. |  | 38 |  | Chief Financial Officer, Executive Vice President, Secretary and Director |  | Chief Financial Officer since February 1999, Secretary since April 2000, Executive Vice President since October 1998 and a Director of the Company since November 1997. Vice President and Portfolio Manager with Roberts, Glore & Co, a registered
investment advisor, from September 1995 to November 1998. Director of Corporate Finance of DENTSPLY International, Inc. from May 1993 through August 1995. Treasurer of GENDEX Corp., a manufacturer of dental and medical equipment, from November 1990
to June 1993.
|--------------------- |  | -- |  | ------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Eric J. Stetzel       |  | 45 |  | Vice President                                                            |  | Vice President since February 1999. President of Young Acquisitions Company since February 1998. President of Panoramic Rental Corp. since April 1998. President of Panoramic Corporation from 1986 to February 1998.                                                                                                                                                                                                                                                                                                     
|Daniel E. Garrick     |  | 33 |  | Vice President, Assistant Secretary                                       |  | Vice President and Assistant Secretary since April 2001, Director of Business Development of Young Innovations since August 1999, Partner of Alta Management Consulting from December 1998 to August 1999, variety of consulting positions with Dewar
Sloan, a management consulting company, from July 1993 to November 1998.                                                                                                                                                                                            
|Sean T. O'Connor      |  | 33 |  | Vice President                                                            |  | Vice President since April 2001, Director of Business Development of Young Innovations since August 1999, Partner of Alta Management Consulting from December 1998 to August 1999, variety of consulting positions with Dewar Sloan from June 1994 to
November 1998.                                                                                                                                                                                                                                                      

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Item 2.    Properties.

The Company's facilities are as follows:

|Description                              |  | Square Feet |  | Location              |  | Owned/Leased                  
|---------------------------------------- |  | ----------- |  | --------------------- |  | ------------------------------
|Corporate Headquarters and Manufacturing |  | 117,000     |  | Earth City, Missouri  |  | Owned                         
|Manufacturing                            |  | 12,000      |  | Brownsville, Texas    |  | Owned                         
|Office and Manufacturing                 |  | 52,000      |  | Fort Wayne, Indiana   |  | Owned                         
|Office and Manufacturing                 |  | 4,000       |  | Fort Wayne, Indiana   |  | Leased, expires December 2002 
|Office and Manufacturing                 |  | 24,000      |  | Louisville, Colorado  |  | Leased, expires December 2002 
|Office and Distribution                  |  | 24,000      |  | Riverside, California |  | Leased, expires March 2002    
|Distribution                             |  | 13,000      |  | Morristown, Tennessee |  | Leased on month to month terms
|Office                                   |  | 3,000       |  | Algonquin, Illinois   |  | Leased, expires March 2005    

The Company believes that its facilities are generally in good condition.

Item 3. Legal Proceedings.

On May 24, 2001, Sultan Dental Products, Ltd. ("Sultan") filed a complaint in the United States District Court for the Southern District of New York
(which was subsequently dismissed by the plaintiff and refiled in the United States District Court for the District of New Jersey on October 16, 2001) asserting that the Young disposable prophy
angle infringes a patent that is exclusively licensed to Sultan. The complaint seeks a permanent injunction and unspecified damages. While this matter is in its early stages, the Company believes it
has meritorious defenses to the claims and intends to vigorously defend this matter. In addition, on January 25, 2002, Young filed a complaint in the United States District Court for the
Eastern District of Missouri asserting that the manufacture of the Sultan disposable prophy angle infringes Young's U.S. Patent No. 5,749,728. The complaint seeks a permanent injunction and
damages.

The
Company and its subsidiaries from time to time are also parties to various legal proceedings arising in the normal course of business. Management believes that none of these
proceedings, if determined adversely, would have a material adverse effect on the Company's financial position, results of operations or liquidity.

Item 4. Submission of Matters to a Vote of Security Holders.

Not Applicable.

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PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.

The Common Stock trades on the Nasdaq National Market under the symbol of "YDNT."

On
March 12, 2002, the Board of Directors declared a three-for-two stock split of the Company's Common Stock in the form of a stock dividend payable on
March 28, 2002 to shareholders of record as of the close of business on March 22, 2002. All share and per share numbers in this Report give effect to such stock split.

The
following table, as adjusted for the stock split, sets forth the high and low prices of the Common Stock as reported by the Nasdaq National Market during the last eight quarters.

|     |        | Market Price
|---- | ------ | ------------
|
|
|2000 |        |             
|     | First  |             
|     | Second |             
|     | Third  |             
|     | Fourth |             
|2001 |        |             
|     | First  |             
|     | Second |             
|     | Third  |             
|     | Fourth |             

On
February 28, 2002, there were approximately 32 holders of record of the Company's Common Stock.

The
Company has not paid cash dividends on its Common Stock since its inception. The Company currently intends to retain earnings for use in its business and, therefore, does not
anticipate paying any cash dividends in the foreseeable future. Payment of cash dividends, if any, will be at the discretion of the Company's Board of Directors and will be dependent upon the earnings
and financial condition of the Company and any other factors deemed relevant by the Board of Directors and will be subject to any applicable restrictions contained in the Company's then existing
credit arrangements.

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Item 6. Selected Financial Data.

The following table presents selected financial data of the Company. This historical data should be read in conjunction with the Consolidated Financial Statements
and the related notes thereto in Item 8 and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7. All amounts except earnings per share data are
expressed in thousands.

|                       |                                                        | Year Ended December 31,
|---------------------- | ------------------------------------------------------ | -----------------------
|
|Income Statement Data: |                                                        |                        
|                       | Net sales                                              |                        
|                       | Cost of goods sold                                     |                        
|                       |                                                        |                        
|                       | Gross profit                                           |                        
|                       | Selling, general and administrative expenses           |                        
|                       |                                                        |                        
|                       | Income from operations                                 |                        
|                       | Interest expense and other, net                        |                        
|                       |                                                        |                        
|                       | Income before provision for income taxes               |                        
|                       | Provision for income taxes                             |                        
|                       |                                                        |                        
|                       | Net income                                             |                        
|                       |                                                        |                        
|                       | Basic earnings per share (7)                           |                        
|                       |                                                        |                        
|                       | Basic weighted average common shares Outstanding (7)   |                        
|                       | Diluted earnings per share (7)                         |                        
|                       |                                                        |                        
|                       | Diluted weighted average common shares Outstanding (7) |                        

|                    |                                           | As of December 31,
|------------------- | ----------------------------------------- | ------------------
|
|Balance Sheet Data: |                                           |                   
|                    | Working capital                           |                   
|                    | Total assets                              |                   
|                    | Total debt (including current maturities) |                   
|                    | Stockholders' equity                      |                   

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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

General

The Company develops, manufactures and markets supplies and equipment used by dentists, dental hygienists, dental assistants and consumers. The Company's product
offering includes disposable and metal prophy angles, prophy cups and brushes, panoramic x-ray machines, dental handpieces (drills) and related components, orthodontic toothbrushes,
flavored examination gloves, children's toothbrushes, children's toothpastes, moisture control and infection control products. The Company believes it is the leading manufacturer and distributor of
prophy angles and cups (used in teeth cleaning and polishing procedures) and dental surface disinfectants in the United States. The Company also believes it is the leading distributor of panoramic
X-ray equipment in the United States.

The
principal components of the Company's growth strategy are to continuously improve its operating efficiencies, to develop new products and to complete strategic acquisitions. In order
to help fund the Company's strategy for growth, the Company completed an initial public offering of 3.5 million shares of its Common Stock in November 1997, resulting in net proceeds of
$25.2 million. The Company used the proceeds to repay debt incurred with previous acquisitions and to fund future strategic acquisitions.

On
February 27, 1998, the Company acquired the assets of Panoramic for $13.9 million cash plus 93,750 shares of the Company's Common Stock and assumed approximately
$3.9 million of Panoramic's liabilities, of which $2.6 million was repaid at closing. On April 2, 1999, the Company acquired the stock of Athena for $4.2 million in cash
plus $232,000 in notes payable to the previous shareholders. On June 13, 2000 the Company acquired the assets of Plak Smacker for approximately $7.1 million in cash. On June 12,
2001 the Company acquired the assets of Biotrol for approximately $9.3 million in cash. The results of operations for these acquisitions are included in the consolidated financial statements
since the date of acquisition. The acquisitions were accounted for as purchase transactions.

On
March 12, 2002, the Board of Directors declared a three-for-two stock split of the Company's Common Stock in the form of a stock dividend payable on
March 28, 2002 to shareholders of record as
of the close of business on March 22, 2002. All share and per share numbers in this Report give effect to such stock split.

Critical Accounting Policies

In December 2001, the SEC requested that all registrants include in their MD&A their most critical accounting policies, the judgments and uncertainties
affecting the application of those policies, and the likelihood that materially different amounts would be reported under different conditions using different assumptions. The SEC indicated that a
"critical accounting policy" is one which is both important to the portrayal of the company's financial condition and results and requires management's most difficult, subjective or complex judgments,
often as a result of the need to make estimates about the effect of matters that are inherently uncertain. We believe that the following accounting policies fit this definition:

Allowance
for doubtful accountsThe Company has 35% of its December 31, 2001 accounts receivable balance with two large customers (see footnote 5) with the
remaining balance among numerous customers, some of which are international. Accounts receivable balances are subject to credit risk. Management has attempted to reserve for expected credit losses,
sales returns and allowances, and discounts based upon past experience as well as knowledge of current customer information. We believe that our reserves are adequate. It is possible, however, that
the accuracy of our estimation process could be impacted by unforeseen circumstances. We continuously review our reserve balance and refine the estimates to reflect any changes in circumstances,
however, we cannot guarantee that we will accurately estimate credit losses on these accounts receivable.

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InventoryThe
Company values inventory at the lower of cost or market. Management regularly reviews inventory quantities on hand and records a provision for excess or
obsolete inventory based primarily on estimated product demand and other knowledge related to the inventory. Demand for our products can fluctuate and our estimates of future product demand may move
or be inaccurate, in which case we may have understated or overstated the provision required for excess or obsolete inventory. In the future, if our inventory is determined to be overvalued, we would
be required to recognize such costs in our cost of goods sold at the time of such determination. Likewise, if our inventory is determined to be undervalued, we may have over-reported our
cost of goods sold in previous periods and would be required to recognize such additional operating income at the time of sale. Therefore, although we make every effort to ensure the accuracy of our
provision, any significant unanticipated changes could have a significant impact on the value of our inventory and our reported operating results.

Results of Operations

The following table sets forth, for the periods indicated, certain items from the Company's statements of income expressed as a percentage of net sales.

|                                             |  | Year Ended December 31, |  
|-------------------------------------------- |  | ----------------------- | -
|
|Net sales                                    |  | 100.0                   | %
|Cost of goods sold                           |  | 47.2                    |  
|                                             |  |                         |  
|Gross profit                                 |  | 52.8                    |  
|Selling, general and administrative expenses |  | 28.1                    |  
|                                             |  |                         |  
|Income from operations                       |  | 24.7                    |  
|Interest expense and other, net              |  | .3                      |  
|                                             |  |                         |  
|Income before provision for income taxes     |  | 24.4                    |  
|Provision for income taxes                   |  | 9.4                     |  
|                                             |  |                         |  
|Net income                                   |  | 15.0                    | %
|                                             |  |                         |  

Year Ended December 31, 2001 Compared to Year Ended December 31, 2000

Net SalesNet sales increased $12.3 million, or 23.9%, to $63.7 million in 2001 from
$51.4 million in 2000. The increase was primarily attributable to the inclusion of sales of Biotrol (acquired June 12, 2001) and a full year of Plak Smacker (acquired on June 13,
2000), as well as increased sales of products in the base business.

Gross ProfitGross profit increased $6.3 million, or 22.8%, to $33.6 million in 2001 from $27.4 million
in 2000. Gross profit was favorably impacted by the acquisition of Biotrol and a full year of Plak Smacker. Gross margin decreased to 52.8% of net sales in 2001 from 53.3% in 2000. This decrease was
primarily attributable to the full year inclusion of Plak Smacker sales, which typically earn lower gross margins.

Selling, General, and Administrative Expenses ("SG&A")SG&A expenses increased $4.1 million, or 30.1%, to
$17.9 million in 2001 from $13.8 million in 2000 primarily due to the inclusion of expenses of Biotrol and a full year of Plak Smacker. As a percent of net sales, SG&A expenses increased
to 28.1% in 2001 from 26.8% in 2000 primarily due to higher SG&A spending at Biotrol.

Income from OperationsIncome from operations increased $2.1 million or 15.5%, to $15.7 million in 2001 from
$13.6 million in 2000 as a result of the factors explained above.

14

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Interest ExpenseInterest expense increased to $244,000 in 2001 from $99,000 in 2000 as a result of additional borrowings on
the Company's credit facility in 2001 to fund the Biotrol acquisition as well as the stock repurchase.

Other Expense (Income), NetOther income increased $28,000 to ($19,000) in 2001 from $9,000 in 2000 as a result of various
income items including rental income, which offset other expenses.

Provision for Income TaxesProvision for income taxes increased $755,000 in 2001 to $6.0 million from
$5.2 million for 2000 primarily as a result of higher pre-tax income. The effective tax rate of 38.5% in 2001 compares to 38.6% in 2000. The 2001 rate reflects savings resulting
from federal and state tax planning offset by the phase-in of the 35% tax rate.

Year Ended December 31, 2000 Compared to Year Ended December 31, 1999

Net SalesNet sales increased $8.7 million, or 20.3%, to $51.4 million in 2000 from
$42.7 million in 1999. The increase was primarily attributable to the inclusion of sales of Plak Smacker (acquired on June 13, 2000). The balance of the increase was due to higher sales
of products in the base business.

Gross ProfitGross profit increased $3.5 million, or 14.7%, to $27.4 million in 2000 from $23.9 million
in 1999. Gross profit was favorably impacted by the acquisition of Plak Smacker and by the increased sales of products in the base business. Gross margin decreased to 53.3% of net sales in 2000 from
55.9% in 1999. This decrease was primarily attributable to the inclusion of Plak Smacker sales, which typically earn lower gross margins.

Selling, General, and Administrative Expenses ("SG&A")SG&A expenses increased $1.6 million, or 12.8%, to
$13.8 million in 2000 from $12.2 million in 1999 primarily due to the inclusion of expenses of Plak Smacker. As a percent of net sales, SG&A expenses decreased to 26.8% in 2000 from
28.5% in 1999 due to operating efficiencies realized from consolidating prior acquisitions and strong operating expense control.

Income from OperationsIncome from operations increased $1.9 million or 16.6%, to $13.6 million in 2000 from
$11.7 million in 1999 as a result of the factors explained above.

Interest ExpenseInterest expense decreased to $99,000 in 2000 from $105,000 in 1999.

Other Expense (Income), NetOther expense increased $146,000 to $9,000 in 2000 from ($137,000) in 1999 primarily due to a full
year inclusion of the Company's portion of the loss from its investment in International Assembly, Inc. ("IAI") during 2000.

Provision for Income TaxesProvision for income taxes increased $648,000 in 2000 to $5.2 million from
$4.6 million for 1999 primarily as a result of higher pre-tax income. The effective tax rate of 38.6% in 2000 compares to 39.0% in 1999. The 2000 rate reflects savings resulting
from federal and state tax planning.

Liquidity and Capital Resources

Historically, the Company has financed its operations primarily through cash flow from operating activities and, to a lesser extent, through borrowings under its
credit facility. Net cash flow from
operating activities was $14.1 million, $7.7 million, and $8.9 million for 2001, 2000 and 1999, respectively. Capital expenditures for property, plant and equipment were
$7.0 million, $2.2 million, and $1.5 million in 2001, 2000 and 1999, respectively. Capital expenditures in 2001 included $3.3 million for additional manufacturing and
office space in Earth City, MO and Fort Wayne, IN, and $2.3 million for additional machinery and equipment. Consistent with the Company's historical capital expenditures, future capital
expenditures are expected to include facility improvements, panoramic X-ray machines

15

---

for the Company's rental program, production machinery and information systems. Other significant uses of cash over the three years are as follows:

On
November 2, 2001, the Company purchased 1,050,000 shares of its common stock from George E. Richmond, its Chairman, for approximately $14.9 million. The purchase
was financed through borrowings on the Company's credit facility.

On
June 12, 2001, the Company acquired substantially all the assets of Biotrol for approximately $9.3 million in cash. The purchase price was principally financed with
borrowings on the Company's credit facility and cash generated from operations.

On
June 13, 2000, the Company acquired substantially all of the assets of Plak Smacker for approximately $7.1 million in cash. The purchase price was principally financed
with borrowings on the Company's credit facility and cash generated from operations.

On
May 17, 1999, the Company invested approximately $1.0 million in exchange for a one-third interest in IAI. The investment was principally financed with cash
generated from operations. The Company has an option to purchase the remaining two-thirds interest in IAI or to sell its one-third interest back to IAI in 2002.

On
April 2, 1999, the Company acquired Athena. The Company paid approximately $4.2 million in cash and issued approximately $232,000 in notes payable to the previous
shareholders. The cash portion of the purchase price was principally financed with cash generated from operations and borrowings under the Company's credit line.

During
March 2001, the Company entered into a one-year $20.0 million credit agreement. The agreement was amended in April and September 2001, to extend
the term to three-years and increase the borrowing capacity to $40.0 million. Borrowings under the agreement bear interest at rates ranging from LIBOR + 1% to
LIBOR + 2.25% or Prime to Prime + .5%. Administrative fees for this agreement range from .15% to .25% of the unused balance. The agreement is unsecured and contains various
financial and other covenants. As of December 31, 2001, the Company was in compliance with all of these covenants. During 2001, the Company borrowed under the credit facility to finance the
acquisition of Biotrol, the repurchase of Common Stock, investments in facilities and equipment and for working
capital needs. At December 31, 2001, there were $16.7 million in outstanding borrowings under this agreement. Management believes through its operating cash flows as well as borrowing
capabilities, the Company has adequate liquidity and capital resources to meet its needs on a short and long-term basis.

The
Company has certain contractual obligations and/or commercial commitments. The following table represents the aggregate maturities and expiration amounts of various classes of
obligations at December 31, 2001 (in thousands):

|                                       |  | Payments due by period
|-------------------------------------- |  | ----------------------
|
|Capital Lease Obligations              |  | $                     
|Operating Leases (including buildings) |  |                       
|Long-Term Debt                         |  |                       
|                                       |  |                       
|Total Contractual Cash                 |  | $                     
|                                       |  |                       

Recent Financial Accounting Standards Board Statements

In July 2001, the Financial Accounting Standards Board adopted SFAS No. 141 "Business Combinations" and No. 142, "Goodwill and Intangible
Assets." SFAS No. 141 requires all business

16

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combinations initiated after June 30, 2001 as well as all business combinations for which the date of acquisition is July 1, 2001 or later to be accounted for using the purchase method
of accounting. The adoption of SFAS No. 141 did not impact the consolidated financial statements of the Company.

Under
SFAS No. 142, goodwill is no longer subject to amortization over its useful life; rather, it is subject to at least annual assessments of impairment. Also, under SFAS
No. 142, an intangible asset should be recognized if the benefit of the intangible is obtained through contractual or other legal rights or if the intangible asset can be sold, transferred,
licensed, rented or exchanged. The Company stopped amortizing goodwill effective January 1, 2002 in accordance with the provisions above. Other intangible assets will continue to be amortized over
their estimated useful lives. In addition, the Company is in the process of performing their initial goodwill impairment test.

In
June 2001, the Financial Accounting Standards Board issued SFAS No. 143, "Accounting for Asset Retirement Obligations." Under SFAS No. 143, the fair value of a
liability for an asset retirement obligation is required to be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement
costs are capitalized as part of the carrying amount of the long-lived asset. SFAS No. 143 is required to be implemented by the Company by January 1, 2003. Adoption of SFAS
No. 143 will not have a material impact on the consolidated financial statements of the Company.

In
August 2001, the Financial Accounting Standards Board issued SFAS No. 144, "Accounting for the Impairment of Disposal of Long-Lived Assets." SFAS
No. 144 addresses financial accounting and reporting for the impairment of long-lived assets and for the long-lived assets to be disposed of and supersedes SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of." SFAS No. 144 establishes a single accounting model for
long-lived assets to be disposed of by sale and resolves implementation issues related to SFAS No. 121. SFAS No. 144 is required to be implemented by the Company on
January 1, 2003. Adoption of SFAS No. 144 will not have a material impact on the consolidated financial statements of the Company.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

The Company finances a portion of its working capital and capital requirements with cash from borrowings under a revolving credit facility. Due to the variable
interest rate feature on the debt, the Company is exposed to interest rate risks. The Company does not use derivatives to manage its interest rate risks.

17

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Item 8. Financial Statements and Supplementary Data.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To
Young Innovations, Inc.:

We
have audited the accompanying consolidated balance sheets of Young Innovations, Inc. (a Missouri corporation) and subsidiaries as of December 31, 2001 and 2000, and the
related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2001. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We
conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Young Innovations, Inc. and
subsidiaries as of December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, in conformity
with accounting principles generally accepted in the United States.

ARTHUR
ANDERSEN LLP

Chicago,
Illinois
February 4, 2002 (except with respect to the matter discussed in Note 22, as to which the date is March 22, 2002)

18

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YOUNG INNOVATIONS, INC.

CONSOLIDATED BALANCE SHEETS  (In thousands, except share data)

|                                     |                                                                                                                                                                                  | December 31                |                                           
|------------------------------------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------------------------------------------
|
|Assets                               |                                                                                                                                                                                  |                            |                                           
|Current assets:                      |                                                                                                                                                                                  |                            |                                           
|                                     | Cash and cash equivalents                                                                                                                                                        |                            | $                                         
|                                     | Trade accounts receivable, net of allowance for doubtful accounts of $444 and $220, in 2001 and 2000, respectively                                                               |                            |                                           
|                                     | Inventories                                                                                                                                                                      |                            |                                           
|                                     | Other current assets                                                                                                                                                             |                            |                                           
|                                     |                                                                                                                                                                                  |                            |                                           
|                                     |                                                                                                                                                                                  | Total current assets       |                                           
|                                     |                                                                                                                                                                                  |                            |                                           
|Property, plant and equipment, net   |                                                                                                                                                                                  |                            | 18,759                                    
|                                     |                                                                                                                                                                                  |                            |                                           
|Other assets                         |                                                                                                                                                                                  |                            | 1,458                                     
|                                     |                                                                                                                                                                                  |                            |                                           
|Intangible assets                    |                                                                                                                                                                                  |                            | 44,384                                    
|                                     |                                                                                                                                                                                  |                            |                                           
|                                     |                                                                                                                                                                                  |                            | Total assets                              
|                                     |                                                                                                                                                                                  |                            |                                           
|Liabilities and Stockholders' Equity |                                                                                                                                                                                  |                            |                                           
|Current liabilities:                 |                                                                                                                                                                                  |                            |                                           
|                                     | Current maturities of long-term debt                                                                                                                                             |                            | $                                         
|                                     | Accounts payable and accrued liabilities                                                                                                                                         |                            |                                           
|                                     |                                                                                                                                                                                  |                            |                                           
|                                     |                                                                                                                                                                                  | Total current liabilities  |                                           
|                                     |                                                                                                                                                                                  |                            |                                           
|Long-term debt                       |                                                                                                                                                                                  |                            | 16,843                                    
|                                     |                                                                                                                                                                                  |                            |                                           
|Deferred income taxes                |                                                                                                                                                                                  |                            | 4,312                                     
|                                     |                                                                                                                                                                                  |                            |                                           
|Stockholders' equity:                |                                                                                                                                                                                  |                            |                                           
|                                     | Common stock, voting, $.01 par value, 25,000,000 shares authorized, 8,921,390 and 9,756,894 shares issued and outstanding, net of treasury stock, in 2001 and 2000, respectively |                            |                                           
|                                     | Additional paid-in capital                                                                                                                                                       |                            |                                           
|                                     | Deferred stock compensation                                                                                                                                                      |                            |                                           
|                                     | Retained earnings                                                                                                                                                                |                            |                                           
|                                     | Common stock in treasury, at cost, 1,417,676 and 462,621 shares in 2001 and 2000, respectively                                                                                   |                            |                                           
|                                     |                                                                                                                                                                                  |                            |                                           
|                                     |                                                                                                                                                                                  | Total stockholders' equity |                                           
|                                     |                                                                                                                                                                                  |                            |                                           
|                                     |                                                                                                                                                                                  |                            | Total liabilities and stockholders' equity
|                                     |                                                                                                                                                                                  |                            |                                           

The
accompanying notes are an integral part of these balance sheets.

19

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YOUNG INNOVATIONS, INC.

CONSOLIDATED STATEMENTS OF INCOME  (In thousands, except share data)

|                                            |                                              | Years Ended December 31 |          
|------------------------------------------- | -------------------------------------------- | ----------------------- | ---------
|
|Net sales                                   |                                              | $                       | 63,659   
|                                            | Cost of goods sold                           |                         |          
|                                            |                                              |                         |          
|Gross profit                                |                                              |                         | 33,642   
|                                            | Selling, general and administrative expenses |                         |          
|                                            |                                              |                         |          
|Income from operations                      |                                              |                         | 15,745   
|                                            | Interest expense                             |                         |          
|                                            | Other expense (income), net                  |                         |          
|                                            |                                              |                         |          
|Income before provision for income taxes    |                                              |                         | 15,520   
|                                            | Provision for income taxes                   |                         |          
|                                            |                                              |                         |          
|Net income                                  |                                              | $                       | 9,545    
|                                            |                                              |                         |          
|Basic earnings per share                    |                                              | $                       | 0.99     
|                                            |                                              |                         |          
|Diluted earnings per share                  |                                              | $                       | 0.96     
|                                            |                                              |                         |          
|Basic weighted average shares outstanding   |                                              |                         | 9,662,100
|                                            |                                              |                         |          
|Diluted weighted average shares outstanding |                                              |                         | 9,903,939
|                                            |                                              |                         |          

The
accompanying notes are an integral part of these statements.

20

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YOUNG INNOVATIONS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY  (In thousands)

|                           |                                             | Common
Stock |     | Additional
Paid-In
Capital |   | Retained
Earnings |       | Common
Stock in
Treasury |        | Deferred Stock
Compensation |   | Total   |         | Comprehensive
Income
|-------------------------- | ------------------------------------------- | ------------ | --- | -------------------------- | - | ----------------- | ----- | ------------------------ | ------ | --------------------------- | - | ------- | ------- | --------------------
|Balance,
December 31, 1998 |                                             | $            | 101 |                            | $ | 26,050            |       | $                        | 22,359 |                             | $ | (309    | )       |                     
|                           | Net income                                  |              |     |                           |   |                   |      |                          |        | 7,152                       |   |         |        |                     
|                           | Common stock purchased                      |              |     | (3                         | ) |                   |      |                          |        |                            |   |         | (3,320  | )                   
|                           | Stock options exercised                     |              |     |                           |   |                   |      |                          |        |                            |   |         | 107     |                     
|                           | Comprehensive income                        |              |     |                            |   |                   |       |                          |        |                             |   |         |         |                     
|                           |                                             |              |     |                            |   |                   |       |                          |        |                             |   |         |         |                     
|Balance,
December 31, 1999 |                                             |              | 98  |                            |   | 26,050            |       |                          | 29,511 |                             |   | (3,522  | )       |                     
|                           | Net income                                  |              |     |                           |   |                   |      |                          |        | 8,305                       |   |         |        |                     
|                           | Common stock purchased                      |              |     |                           |   |                   |      |                          |        |                            |   |         | (104    | )                   
|                           | Stock options exercised                     |              |     |                           |   |                   | 10    |                          |        |                            |   |         | 89      |                     
|                           | Comprehensive income                        |              |     |                            |   |                   |       |                          |        |                             |   |         |         |                     
|                           |                                             |              |     |                            |   |                   |       |                          |        |                             |   |         |         |                     
|Balance,
December 31, 2000 |                                             |              | 98  |                            |   | 26,060            |       |                          | 37,816 |                             |   | (3,537  | )       |                     
|                           | Net income                                  |              |     |                            |   |                   |       |                          |        | 9,545                       |   |         |         |                     
|                           | Common stock purchased                      |              |     | (9                         | ) |                   |      |                          |        |                            |   |         | (14,908 | )                   
|                           | Stock options exercised                     |              |     |                           |   |                   | 86    |                          |        |                            |   |         | 660     |                     
|                           | Deferred stock compensation                 |              |     |                           |   |                   | 1,682 |                          |        |                            |   |         |        |                     
|                           | Amortization of deferred stock compensation |              |     |                           |   |                   |      |                          |        |                            |   |         |        |                     
|                           | Comprehensive income                        |              |     |                            |   |                   |       |                          |        |                             |   |         |         |                     
|                           |                                             |              |     |                            |   |                   |       |                          |        |                             |   |         |         |                     
|Balance,
December 31, 2001 |                                             | $            | 89  |                            | $ | 27,828            |       | $                        | 47,361 |                             | $ | (17,785 | )       | $                   
|                           |                                             |              |     |                            |   |                   |       |                          |        |                             |   |         |         |                     

The
accompanying notes are an integral part of these statements.

21

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YOUNG INNOVATIONS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS  (In thousands)

|                                                     |                                                                              | Years Ended December 31            |                                         
|---------------------------------------------------- | ---------------------------------------------------------------------------- | ---------------------------------- | ----------------------------------------
|
|Cash flows from operating activities:                |                                                                              |                                    |                                         
|                                                     | Net income                                                                   |                                    | $                                       
|                                                     |                                                                              |                                    |                                         
|                                                     | Adjustments to reconcile net income to cash flows from operating activities |                                    |                                         
|                                                     |                                                                              | Depreciation and amortization      |                                         
|                                                     |                                                                              | Deferred income taxes              |                                         
|                                                     |                                                                              | Gain on sale of equipment          |                                         
|                                                     |                                                                              | Other                              |                                         
|                                                     |                                                                              | Changes in assets and liabilities |                                         
|                                                     |                                                                              |                                    | Trade accounts receivable               
|                                                     |                                                                              |                                    | Inventories                             
|                                                     |                                                                              |                                    | Other current assets                    
|                                                     |                                                                              |                                    | Other assets                            
|                                                     |                                                                              |                                    | Accounts payable and accrued liabilities
|                                                     |                                                                              |                                    |                                         
|                                                     |                                                                              |                                    |                                         
|                                                     |                                                                              |                                    |                                         
|Cash flows from investing activities:                |                                                                              |                                    |                                         
|                                                     | Payments for acquisitions, net of cash acquired                              |                                    |                                         
|                                                     | Payments for investment in IAI                                               |                                    |                                         
|                                                     | Purchases of property, plant and equipment                                   |                                    |                                         
|                                                     | Other investing activities                                                   |                                    |                                         
|                                                     |                                                                              |                                    |                                         
|                                                     |                                                                              |                                    |                                         
|                                                     |                                                                              |                                    |                                         
|Cash flows from financing activities:                |                                                                              |                                    |                                         
|                                                     | Payments on long-term debt                                                   |                                    |                                         
|                                                     | Borrowings on long-term debt                                                 |                                    |                                         
|                                                     | Proceeds from stock options exercised                                        |                                    |                                         
|                                                     | Common stock in treasury, purchased                                          |                                    |                                         
|                                                     |                                                                              |                                    |                                         
|                                                     |                                                                              |                                    |                                         
|                                                     |                                                                              |                                    |                                         
|Net increase (decrease) in cash and cash equivalents |                                                                              |                                    | 82                                      
|Cash and cash equivalents, beginning of period       |                                                                              |                                    |                                        
|                                                     |                                                                              |                                    |                                         
|Cash and cash equivalents, end of period             |                                                                              | $                                  | 82                                      
|                                                     |                                                                              |                                    |                                         

The
accompanying notes are an integral part of these statements.

22

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YOUNG INNOVATIONS, INC.        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS        (Dollars in thousands, except share data)

1.    ORGANIZATION:

Young Innovations, Inc. and subsidiaries (the "Company") develops, manufactures and markets supplies and equipment used by dentists, dental hygienists,
dental assistants and consumers. The Company's product offering includes disposable and metal prophy angles, prophy cups and brushes, panoramic x-ray machines, dental handpieces (drills)
and related components, orthodontic toothbrushes, flavored examination gloves, children's toothbrushes, children's toothpastes, moisture control and infection control products. The Company's
manufacturing and distribution facilities are located in Missouri, California, Indiana, Colorado, Tennessee and Texas. Export sales were less than 10% of total net sales for 2001, 2000 and 1999.

On
March 12, 2002, the Board of Directors declared a three-for-two stock split of the Company's Common Stock in the form of a stock dividend payable on
March 28, 2002 to shareholders of record as of the close of business on March 22, 2002. All share and per share numbers in this Report give effect to such stock split.

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Principles of Consolidation

The consolidated financial statements include the accounts of Young Innovations, Inc. formed in July 1995 and its direct and indirect wholly owned
subsidiaries. All significant intercompany accounts and transactions are eliminated in consolidation.

Cash and Cash Equivalents

Cash and cash equivalents include all highly liquid investments with an initial maturity of three months or less.

Inventories

Inventories are stated at the lower of cost (which includes material, labor and manufacturing overhead) or market. Cost is determined by the first-in,
first-out (FIFO) method.

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Expenditures for repairs and maintenance are charged to expense as incurred, and additions and improvements that
significantly extend the lives of assets are capitalized. Upon disposition, cost and accumulated depreciation are eliminated from the related accounts and any gain or loss is reflected in the
statements of income. The Company provides depreciation using the straight-line method over the estimated useful lives of respective classes of assets as follows:

Buildings and improvements

3 to 40 yearsMachinery and equipment

3 to 10 yearsEquipment rented to others

4 to 15 years


23

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Other Assets

On May 17, 1999, the Company acquired a one-third interest in International Assembly, Inc., a Texas corporation (IAI). The Company paid
approximately $1,050 in cash for this investment. The Company has an option to purchase the remaining two-thirds interest in IAI or to sell its one-third interest back to IAI
in 2002.

The
Company purchases certain services from IAI at amounts less than would be paid to unrelated parties. These services totaled $830, $632 and $174 in 2001, 2000 and 1999, respectively.
The investment is being accounted for under the equity method of accounting. Equity income (losses) (using a 3 month lag) is recorded net, after reduction of goodwill amortized
straight-line over 10 years. Goodwill of approximately $931 is based upon the excess of the amount paid for its interest in IAI over the fair value of its portion of IAI's tangible
net assets at the date of the investment. The Company's share of losses and goodwill amortization for IAI is included in other expenses and totaled $240, $203 and $80 for 2001, 2000 and 1999,
respectively. The Company's portion of IAI's income (loss), net of goodwill amortization, for the fourth quarter 2001 is expected to be less than $25. The asset balance at December 31, 2001 for
this investment is $527.

Other
assets also include notes receivable and costs related to patents issued to the Company and patent applications. Capitalized patent costs are amortized on a
straight-line basis over the estimated useful lives of the patents, generally 17 years.

Intangible Assets

Intangible assets, consisting of goodwill, are stated at cost less accumulated amortization. Amortization is determined using the straight-line method
over periods ranging from 10 to 40 years.

Long-Lived Assets

If facts and circumstances suggest that a long-lived asset may be impaired, the carrying value is reviewed. If this review indicates that the carrying
value of the asset will not be recovered, as determined based on projected undiscounted cash flows related to the asset over its remaining life, the carrying value of the asset is reduced to its
estimated fair value.

Use of Estimates

The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates
and assumptions that effect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reported period. Actual results could differ from those estimates.

Fair Value of Financial Instruments

Financial instruments consist principally of cash, accounts receivable, accounts payable and debt. The estimated fair value of these instruments approximates
their carrying value.

24

---

Advertising Costs

Advertising costs are expensed when incurred. Advertising costs were $1,834, $1,667 and $1,260 for 2001, 2000 and 1999, respectively.

Research and Development Costs

Research and development costs are expensed when incurred and totaled $516, $602 and $802 for 2001, 2000 and 1999, respectively.

Revenue Recognition

Revenue from the sale of products is recorded at the time of passage of title, generally when the products are shipped. Revenue from the rental of equipment to
others is recognized on a month-to-month basis as the revenue is earned.

Equipment Rented to Others

Since the acquisition of Panoramic in 1998, the Company owns x-ray equipment rented on a month-to-month basis to customers.
Installation costs of the equipment are capitalized and amortized over four years. A liability for the removal costs of the equipment expected to be returned to the Company is included in accounts
payable and accrued liabilities at December 31, 2001 and 2000.

Other Expense (Income)

Other expense (income) includes the Company's portion of losses from its investment in IAI, interest income, rental income, sale of scrap, and other miscellaneous
income and expense items, all of which are not directly related to the Company's primary business. In 2001, 2000 and 1999, interest income totaled $96, $119 and $139, respectively.

Income Taxes

The Company has accounted for income taxes under SFAS No. 109, an asset and liability approach to accounting and reporting for income taxes. Deferred
income taxes are provided for temporary differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities.

Supplemental Cash Flow Information

Cash flows from operating activities include $4,611, $4,020 and $4,014 for the payment of federal and state income taxes and $188, $99 and $105 for the payment of
interest during 2001, 2000 and 1999, respectively.

3.    ACQUISITIONS:

On June 12, 2001 the Company acquired substantially all of the assets and assumed a portion of the liabilities of the Biotrol and Challenge subsidiaries of
Pro-Dex, Inc. (collectively "Biotrol"). The Company paid approximately $9,300 in cash and expenses. The acquisition was principally financed with

25

---

borrowings on the Company's credit facility and cash generated from operations. The acquisition was accounted for as a purchase transaction. The preliminary purchase price was allocated based upon
estimates of fair value of assets and liabilities. This excess of purchase price (as preliminarily allocated) over the estimated fair value of net assets acquired (goodwill) was $8,121. The Company is
in the process of finalizing the valuations related to certain assets acquired and upon doing so will adjust the preliminary purchase price allocation if necessary. The results of operations for
Biotrol are included in the consolidated financial statements since June 12, 2001.

On
June 13, 2000 the Company acquired substantially all of the assets and assumed a portion of the liabilities of Plak Smacker. The Company paid $7,053 in cash. The acquisition
was principally financed with borrowings on the Company's credit facility and cash generated from operations. The acquisition was accounted for as a purchase transaction. The purchase price was
allocated based upon estimates of fair value of assets and liabilities. This excess of purchase price over the estimated fair value of net assets acquired (goodwill) was $6,126. The results of
operations for Plak Smacker are included in the consolidated financial statements since June 13, 2000.

On
April 2, 1999, the Company acquired Athena. The Company paid $4,241 in cash and issued $232 in notes payable to the previous shareholders. The cash portion of the purchase
price was principally financed with cash generated from operations and borrowings on the Company credit line. The acquisition was accounted for as a purchase transaction. The purchase price was
allocated based upon estimates of fair values. This excess of purchase price over estimated fair value of net assets (goodwill) was $4,747. The results of operations for Athena are included in the
consolidated financial statements since April 2, 1999.

4.    SEGMENT INFORMATION:

Segment information has been prepared in accordance with Statement of Financial Accounting Standards (SFAS) No. 131, "Disclosures about Segments of an
Enterprise and Related Information." In 2000, with the acquisition of Plak Smacker, the Company has two operating segments according to SFAS No. 131: professional and retail. The professional
segment sells products to dentists, dental hygienists and dental assistants. The retail segment sells products to consumers through mass merchandisers. There are no significant determinable assets or
interest costs for the retail segment.

The
table below is a summary of certain financial information relating to the two segments:

2001

Professional

Retail

ConsolidatedNet sales

$
58,824

$
4,835

$
63,659Income from operations

$
15,484

$
261

$
15,745


2000

Professional

Retail

ConsolidatedNet sales

$
48,737

$
2,650

$
51,387Income from operations

$
13,428

$
205

$
13,633


26

---

5.    MAJOR CUSTOMERS AND CREDIT CONCENTRATION:

The Company generates trade accounts receivable in the normal course of business. The Company grants credit to distributors and customers throughout the world and
generally does not require collateral to secure the accounts receivable. The Company's credit risk is concentrated among two distributors accounting for 35% of accounts receivable at
December 31, 2001 and 30% of accounts receivable as of December 31, 2000.

The
percentage of net sales to major distributors to total net sales consist of the following:

Years Ended
December 31Distributor2001

2000

1999Henry Schein, Inc.

14.6
%
17.0
%
17.7
%Patterson Dental Company

13.3

11.7

14.7


6.    INVENTORIES:

Inventories consist of the following:

December 312001

2000Finished products

$
3,340

$
3,708Work in process


2,030


1,569Raw materials and supplies


1,788


867Total inventories

$
7,158

$
6,144


7.    PROPERTY, PLANT AND EQUIPMENT:

Property, plant and equipment consist of the following:

December 312001

2000Land

$
1,086

$
508Buildings and improvements


7,448


4,068Machinery and equipment


15,350


12,427Equipment rented to others


5,257


4,966Construction in progress


605


55229,746


22,521LessAccumulated depreciation


(10,987
)

(9,265
)Total property, plant and equipment, net

$
18,759

$
13,256


Machinery
and equipment under capital lease and related accumulated depreciation was $794 and $356, respectively at December 31, 2001 and was $794 and $238, respectively at
December 31, 2000. Depreciation expense was $1,922, $1,693 and $1,422 for 2001, 2000 and 1999, respectively.

27

---

8.    OTHER ASSETS:

Other assets consist of the following:

December 312001

2000Patents

$
297

$
315Investment in IAI


527


767Notes receivable, long-term (see footnote 19)


500


500Other


134


390Total other assets

$
1,458

$
1,972


9.    INTANGIBLE ASSETS:

Intangible assets consist of the following:

December 312001

2000Goodwill

$
49,182

$
40,977LessAccumulated amortization


(4,798
)

(3,577
)Total intangible assets

$
44,384

$
37,400


Amortization
of goodwill totaled $1,243, $1,001 and $848 for 2001, 2000 and 1999, respectively.

10.    ACCOUNTS PAYABLE AND ACCRUED LIABILITIES:

Accounts payable and accrued liabilities consist of the following:

December 312001

2000Accounts payable

$
2,045

$
1,491Accrued salaries and bonuses


1,391


1,191Accrued expenses and other


2,988


2,396Total accounts payable and accrued liabilities

$
6,424

$
5,078


28

---



11.    LONG-TERM DEBT AND CREDIT ARRANGEMENTS:

During March 2001, the Company entered into a one-year $20.0 million credit agreement. The agreement was amended in April and
September 2001, to extend the term to three years and increase the borrowing capacity to $40.0 million. Borrowings under the agreement bear interest at rates ranging from
LIBOR + 1% to LIBOR + 2.25% or Prime to Prime + .5%. Administrative fees for this agreement range from .15% to .25% of the unused balance. The agreement is
unsecured and contains various financial and other covenants. As of December 31, 2001, the Company was in compliance with all of these covenants. At December 31, 2001, there were $16,700
in outstanding borrowings under this arrangement.

In
April 1999 and again in June 2000, the Company entered into one-year revolving credit arrangements, which provided a line of credit up to $5,000 at an
interest rate of LIBOR + 1%. During 2000, the Company had borrowed $9,191 and re-paid $9,061 under these arrangements. At December 31, 2000, the Company had an
outstanding revolving line of credit balance of $130. This arrangement was replaced in 2001 by the arrangement described above. Capitalized lease obligations of $284 were also outstanding at
December 31, 2001.

Future
maturities of the credit facility and capital lease obligations are as follows:

2002

$
1412003


752004


16,768Total

$
16,984


12.    COMMON STOCK:

During 2001, the Company repurchased 1,052,100 shares of its Common Stock for $14,917. 1,050,000 of these shares were purchased from George Richmond, the
Company's Chairman (see footnote 19). During 2001, the Company also reissued 119,325 shares of its Common Stock in conjunction with stock option exercises for $746. During 2000, the Company
repurchased 11,250 shares of its Common Stock for $104 and reissued 11,700 shares in conjunction with stock option exercises for $99. During 1999, the Company completed the repurchase of 416,250
shares for $3,323 and reissued 13,500 shares in conjunction with a stock option exercise for $107.

On
March 12, 2002, the Board of Directors declared a three-for-two stock split of the Company's Common Stock in the form of a stock dividend payable on
March 28, 2002 to shareholders of record as of the close of business on March 22, 2002. All share and per share numbers in this Report give effect to such stock split.

13.    STOCK AWARDS:

Stock Options

The Company adopted the 1997 Stock Option Plan (the Plan) effective in November 1997 and amended the Plan in 1999 and 2001. A total of 1,725,000 shares of
Common Stock are reserved for issuance under this plan which is administered by the compensation committee of the Board of Directors (Compensation Committee). Participants in the Plan will be those
employees whom the

29

---

Compensation Committee may select from time to time and those nonemployee directors as the Company's Board of Directors may select from time to time. As of December 31, 2001, 1,421,700 options
had been granted.

A
summary of the options outstanding and exercisable is as follows:

Shares

Range of
Exercise
Prices

Weighted Average Exercise PriceOutstanding, January 1, 1999

522,600

$8.00 - $11.67

$
8.73Granted

381,000

$8.46 - $9.29

$
9.27Exercised

13,500

$8.00

$
8.00Forfeited

102,150

$8.00 - $11.33

$
8.39Outstanding, December 31, 1999

787,950

$8.00 - $11.67

$
9.05Exercisable at December 31, 1999

137,363

$8.00 - $11.67

$
8.85Outstanding, January 1, 2000

787,950

$8.00 - $11.67

$
9.05Granted






Exercised

11,700

$8.00 - $10.00

$
8.51Forfeited

7,350

$8.00 - $10.00

$
8.81Outstanding, December 31, 2000

768,900

$8.00 - $11.67

$
9.07Exercisable at December 31, 2000

438,000

$8.00 - $11.67

$
8.99Outstanding, January 1, 2001

768,900

$8.00 - $11.67

$
9.07Granted

487,500

$14.02

$
14.02Exercised

119,325

$8.00 - $11.33

$
8.58Forfeited

47,550

$8.00 - $11.33

$
9.56Outstanding, December 31, 2001

1,089,525

$8.00 - $14.02

$
11.31Exercisable at December 31, 2001

483,225

$8.00 - $11.67

$
9.08


The
weighted average remaining contractual life of the options outstanding at December 31, 2001 is 8.3 years. As of January 1, 2002, 674,625, shares were exercisable
with a range of exercise prices from $8.00 - $14.02 with a weighted average price of $10.38.

The
Compensation Committee of the Board of Directors establishes vesting schedules for each option issued under the Plan. Outstanding options generally vest over four years. The exercise
price was equal to the fair value of the Common Stock at the date of grant. All options expire 10 years from the grant date.

In
accordance with SFAS No. 123, "Accounting for Stock-Based Compensation," the Company elected APB Opinion No. 25, "Accounting for Stock Issued to Employee," and related
interpretations in accounting for the Plan. Accordingly, no compensation cost has been recognized for the Plan. Had compensation costs for the Plan been determined based upon the fair value of the
options at the grant

30

---

date consistent with the methodology prescribed under SFAS No. 123, the Company's net income and earnings per share would approximate the pro forma amounts below:

|                    |         | Year Ended
December 31, 2001 |       | Year Ended
December 31, 2000 |   | Year Ended
December 31, 1999
|------------------- | ------- | ---------------------------- | ----- | ---------------------------- | - | ----------------------------
|
|
|Net income          |         | $                            | 9,545 |                              | $ | 8,630                       
|Earnings per share: |         |                              |       |                              |   |                             
|                    | Basic   |                              | $     | 0.99                         |   | $                           
|                    | Diluted |                              | $     | 0.96                         |   | $                           

The
fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions: (i) dividend
yield of 0%; (ii) expected volatility of 43.7% and 27.8% for 2001 and 1999, respectively; (iii) risk free interest rate of 4.8% and 6.4% for 2001 and 1999, respectively; and
(iv) expected life of 8.0 years for 2001 and 1999. The weighted average fair value of the options at the grant date was $8.49 and $4.98 for 2001 and 1999, respectively. No options were
granted in 2000.

Restricted Stock

Under the above Plan, restricted stock may be awarded or sold to participants under terms and conditions established by the Compensation Committee. For restricted
stock grants, compensation expense is based upon the grant date market price and is recorded over the vesting period. In October 2001, the Company granted 120,000 shares of restricted stock to certain
executive officers of the Company. No monetary consideration was paid by the officers who received the restricted stock. These shares vest 20% each year for five years starting in October 2002. For
the year ended December 31, 2001, the Company recorded $74 of compensation expense related to the restricted stock grants.

14.    EARNINGS PER SHARE:

Basic earnings per share (Basic EPS) is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period.
Diluted earnings per share (Diluted EPS) include the dilutive effect of stock options and restricted stock, if any, using the treasury stock method. The following table sets forth the computation of
basic and diluted earnings per share:

2001

2000

1999Net income

$
9,545

$
8,305

$
7,152Weighted average shares outstanding for basic earnings per share


9,662,100


9,752,237


9,848,432Dilutive effect of stock options and restricted stock


241,839


161,676


31,159Weighted average shares outstanding for diluted earnings per share


9,903,939


9,913,913


9,879,591Basic earnings per share

$
.99

$
.85

$
.73Diluted earnings per share

$
.96

$
.84

$
.72


31

---

15.    QUARTERLY FINANCIAL DATA (UNAUDITED):

|                           |  | 1st Qtr. |        | 2nd Qtr. |   | 3rd Qtr. |  | 4th Qtr. |        | Year
|-------------------------- |  | -------- | ------ | -------- | - | -------- |  | -------- | ------ | ----
|2001                       |  |          |        |          |   |          |  |          |        |     
|Net sales                  |  | $        | 13,929 |          | $ | 15,022   |  | $        | 16,760 |     
|Gross profit               |  |          | 7,113  |          |   | 7,935    |  |          | 8,895  |     
|Net income                 |  |          | 1,966  |          |   | 2,269    |  |          | 2,425  |     
|Earnings per sharebasic   |  | $        | .20    |          | $ | .23      |  | $        | .25    |     
|Earnings per sharediluted |  | $        | .20    |          | $ | .23      |  | $        | .24    |     
|2000                       |  |          |        |          |   |          |  |          |        |     
|Net sales                  |  | $        | 10,191 |          | $ | 11,860   |  | $        | 14,139 |     
|Gross profit               |  |          | 5,753  |          |   | 6,463    |  |          | 7,298  |     
|Net income                 |  |          | 1,757  |          |   | 1,967    |  |          | 2,125  |     
|Earnings per sharebasic   |  | $        | .18    |          | $ | .20      |  | $        | .22    |     
|Earnings per sharediluted |  | $        | .18    |          | $ | .20      |  | $        | .21    |     

16.    INCOME TAXES:

The components of the provision for income taxes are as follows:

Years Ended December 312001

2000

1999Current

$
5,149

$
4,336

$
3,610Deferred


826


884


962Total provision for income taxes

$
5,975

$
5,220

$
4,572


The
income tax provisions are different from the amount computed by applying the U.S. federal income tax rates to income before provision for income taxes. The reasons for these
differences are as follows:

Years Ended December 312001

2000

1999Income before provision for income taxes

$
15,520

$
13,525

$
11,724U.S. federal income tax rate


35
%

34
%

34
%Computed income taxes


5,432


4,599


3,986Goodwill amortization


143


135


128Other


(59
)

69


53Provision for federal income taxes


5,516


4,803


4,167State income taxes, net of federal tax benefit


459


417


405Provision for income taxes

$
5,975

$
5,220

$
4,572Effective tax rate


38.5
%

38.6
%

39.0
%


32

---

Temporary
differences that gave rise to deferred income tax assets and liabilities are as follows:

December 312001

2000Deferred income tax assets:Trade accounts receivable

$
77

$
85Inventories


100


182Accrued liabilities


847


755Total deferred income tax assets


1,024


1,022Deferred income tax liabilities:Property, plant and equipment


(1,937
)

(1,723
)Intangibles


(1,648
)

(1,284
)Other


(727
)

(478
)Total deferred income tax liabilities


(4,312
)

(3,485
)Net deferred income tax liability

$
(3,288
)
$
(2,463
)


Current
deferred income tax assets of $1,024 and $1,022 are included in other current assets as of December 31, 2001 and 2000, respectively.

17.    SALES OF EQUIPMENT RENTED TO OTHERS:

Panoramic periodically sells x-ray equipment that has been rented to customers in its normal course of business. The Company recognizes revenue for
the proceeds of such sales and records as cost of goods sold the net book value of the equipment. Net sales of the equipment were $1,014, $1,434 and $1,170 for 2001, 2000 and 1999, respectively and
gross profit from the sales was $555, $712 and $642 for 2001, 2000 and 1999, respectively.

18.    EMPLOYEE BENEFITS:

The Company has a defined contribution 401(k) plan covering substantially all full-time employees meeting service and age requirements. Contributions
to the Plan can be made by an employee through deferred compensation and through a discretionary employer contribution. Compensation expense related to this plan was $258, $234 and $26 for 2001, 2000
and 1999, respectively. The Company also provides certain healthcare insurance benefits for substantially all employees.

19.    RELATED-PARTY TRANSACTIONS:

In November 2001, the Company purchased 1,050,000 shares of its common stock from George E. Richmond its Chairman and then Chief Executive Officer for
approximately $14,900.

The
Company sells products to, and pays for services from, a corporation in which a principal stockholder of the Company has an equity interest. Net sales to such corporation totaled
$70, $77, and $86 in 2001, 2000 and 1999, respectively. Amounts paid for services totaled $2, $3 and $3 in 2001, 2000 and 1999, respectively.

33

---

Prior
to 2001, the Company provided administrative services for a corporation in which an officer of the Company has an equity interest. This corporation provided financing for certain
purchasers of the Company's products. Net sales of the Company's products through financing arrangements with such corporation totaled $0 and $277 during 2000 and 1999, respectively. Net sales from
such corporation totaled $16 and $18 in 2000 and 1999 and the accounts receivable from the corporation totaled $12 and $4 at December 31, 2000 and 1999, respectively. There was no activity and
no accounts receivable with this corporation in 2001.

In
August 2000, the Company loaned an officer of the Company $500 in exchange for a three-year unsecured promissory note at an interest rate of 6.27% payable annually.
The note is included in other long-term assets on the balance sheet at December 31, 2001 and 2000, respectively. Interest income of $31 and $13 related to this note was recorded in
2001 and 2000, respectively.

20.    COMMITMENTS AND CONTINGENCIES:

The Company leases certain office, warehouse, manufacturing facilities, automobiles, and equipment under non-cancelable operating leases. The total
rental expense for all operating leases was $636, $324 and $151 for 2001, 2000 and 1999, respectively. Rental commitments amount to: $661 for 2002, $157 for 2003, $99 for 2004 and $42 for 2005.

On
May 24, 2001, Sultan Dental Products, Ltd. ("Sultan") filed a complaint in the United States District Court for the Southern District of New York (which was subsequently
dismissed by the plaintiff and refiled in the United States District Court for the District of New Jersey on October 16, 2001) asserting that the Young disposable prophy angle infringes a
patent that is exclusively licensed to Sultan. The complaint seeks a permanent injunction and unspecified damages. While this matter is in its early stages, the Company believes it has meritorious
defenses to the claims and intends to vigorously defend this matter. In addition, on January 25, 2002, Young filed a complaint in the United States District Court for the Eastern District of
Missouri asserting that the manufacture of the Sultan disposable prophy angle infringes Young's U.S. Patent No. 5,749,728. The complaint seeks a permanent injunction and damages.

The
Company and its subsidiaries from time to time are also parties to various legal proceedings arising in the normal course of business. Management believes that none of these
proceedings, if determined adversely, would have a material adverse effect on the Company's financial position, results of operations or liquidity.

21.    NEW ACCOUNTING STANDARDS

In July 2001, the Financial Accounting Standards Board adopted SFAS No. 141 "Business Combinations" and No. 142, "Goodwill and Intangible
Assets." SFAS No. 141 requires all business combinations initiated after June 30, 2001 as well as all business combinations for which the date of acquisition is July 1, 2001 or
later to be accounted for using the purchase method of accounting. The adoption of SFAS No. 141 did not effect the consolidated financial statements of the Company.

Under
SFAS No. 142, goodwill is no longer subject to amortization over its useful life; rather, it is subject to at least annual assessments of impairment. Also, under SFAS
No. 142, an intangible asset should be recognized if the benefit of the intangible is obtained through contractual or other legal

34

---

rights or if the intangible asset can be sold, transferred, licensed, rented or exchanged. The Company stopped amortizing goodwill effective January 1, 2002 in accordance with the provisions
above. Other intangible assets will continue to be amortized over their estimated useful lives. In addition, the Company is in the process of performing their initial goodwill impairment test.

In
June 2001, the Financial Accounting Standards Board issued SFAS No. 143, "Accounting for Asset Retirement Obligations." Under SFAS No. 143, the fair value of a
liability for an asset retirement obligation is required to be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement
costs are capitalized as part of the carrying amount of the long-lived asset. SFAS No. 143 is required to be implemented by the Company by January 1, 2003. Adoption of SFAS
No. 143 will not have a material impact on the consolidated financial statements of the Company.

In
August 2001, the Financial Accounting Standards Board issued SFAS No. 144, "Accounting for the Impairment of Disposal of Long-Lived Assets." SFAS
No. 144 addresses financial accounting and reporting for the impairment of long-lived assets and for the long-lived assets to be disposed of and supersedes SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of." SFAS No. 144 establishes a single accounting model for
long-lived assets to be disposed of by sale and resolves implementation issues related to SFAS No. 121. SFAS No. 144 is required to be implemented by the Company on
January 1, 2003. Adoption of SFAS No. 144 will not have a material impact on the consolidated financial statements of the Company.

22.    SUBSEQUENT EVENTS

The Board of Directors of the Company authorized a three-for-two stock split on all issued shares of its Common Stock, payable
March 28, 2002, for stockholders of record on March 22, 2002. For every two shares of the Company's Common Stock held on the record date, the holder will receive one additional share. In
lieu of fractional shares, each shareholder will be paid a cash equivalent based upon the closing stock price of the Common Stock on the Nasdaq National Market on March 22, 2002, as adjusted
for the stock split. The financial statements set forth herein have been adjusted to reflect the stock split.

35

---



Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

PART III

Item 10. Directors and Executive Officers of the Registrant.



Item 11. Executive Compensation.

Information concerning this item will be included under the captions "Executive Compensation" and "Option Grants" in the Company's definitive Proxy Statement
prepared in connection with the 2002 Annual Meeting of Shareholders and is incorporated herein by reference. Such proxy statement will be filed with the Commission within 120 days after the
close of the Company's fiscal year.

Item 12. Security Ownership of Certain Beneficial Owners and Management.

Information concerning this item will be included under the caption "Securities Beneficially Owned by Management and Principal Shareholders" in the Company's
definitive Proxy Statement prepared in connection with the 2002 Annual Meeting of Shareholders and is incorporated herein by reference. Such proxy statement will be filed with the Commission within
120 days after the close of the Company's fiscal year.

Item 13. Certain Relationships and Related Transactions.

Information concerning this item will be included under the caption "Certain Relationships and Related Party Transactions" in the Company's definitive Proxy
Statement prepared in connection with the 2002 Annual Meeting of Shareholders and is incorporated herein by reference. Such proxy statement will be filed with the Commission within 120 days
after the close of the Company's fiscal year.

36

---



PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.

(a)(1)

Financial StatementsReference is made to Item 8 hereof:Consolidated Balance SheetsDecember 31, 2001 and 2000Consolidated Statements of IncomeYears ended December 31, 2001, 2000, and 1999Consolidated Statements of Stockholders' EquityYears ended December 31, 2001, 2000, and 1999Consolidated Statements of Cash FlowsYears ended December 31, 2001, 2000, and 1999Notes to Consolidated Financial StatementsDecember 31, 2001


(a)(2) Financial Statement ScheduleThe following financial statement schedule of the Company is included for the years ended December 31,
2001, 2000, and 1999:

Schedule II
Valuation and Qualifying Accounts.

All
other financial statement schedules are omitted for the reason that they are not required or are not applicable, or the required information is shown in the financial statements or
the notes thereto.

(a)(3)
ExhibitsSee the Exhibit Index for the exhibits filed as a part of or incorporated by reference into this report.

|EXHIBIT
NUMBER |  | DESCRIPTION                                                                                                                                                                                                                
|-------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1(a)         |  | Articles of Incorporation of Registrant and Statement of Correction                                                                                                                                                        
|3.2(g)         |  | Amended and Restated By-Laws of Registrant                                                                                                                                                                                 
|4.1(e)         |  | Credit Facilities Agreement among Bank of America, N.A., the other lenders listed therein and Young Innovations, Inc. dated March 20, 2001 (the "Credit Agreement")                                                        
|4.2(e)         |  | Amendment No. 1 to the Credit Agreement dated April 20, 2001                                                                                                                                                               
|4.2(f)         |  | Amendment No. 2 to the Credit Agreement dated September 28, 2001                                                                                                                                                           
|10.1(a)        |  | Escrow Agreement dated May 4, 1995 among Young Dental Manufacturing Company, Chemical Venture Capital Associates, P. Jeffrey Leck, John F. Kirtley, Richard C. Nemanick, Lorvic Holdings, Inc. and Boatmen's Trust Company.
|10.2(a)        |  | Contingent Payment Agreement dated as of May 4, 1995, by and between Young Dental Manufacturing Company, The Richard C. Nemanick Trust and Boatmen's Trust Company.                                                        
|10.3(a)        |  | Young Dental Manufacturing Company Pension Bonus Plan dated as of April 12, 1983.                                                                                                                                          
|10.4(a)        |  | Young Dental Manufacturing Company Profit Sharing Plan dated as of January 1, 1987.                                                                                                                                        
|10.5(g)        |  | Amended and Restated 1997 Stock Option Plan of the Registrant.                                                                                                                                                             
|10.6(c)        |  | Employment Agreement dated October 1, 1999, by and between Young Innovations, Inc. and Alfred E. Brennan, Jr. (revised from agreement dated October 8, 1997)                                                               
|10.7(b)        |  | Asset Purchase and Sale Agreement dated February 16, 1998 between Registrant and Panoramic Corporation.                                                                                                                    
|10.8(c)        |  | Employment Agreement dated July 6, 1999, by and between Young Innovations, Inc. and Arthur L. Herbst, Jr.                                                                                                                  
|               |  |                                                                                                                                                                                                                            

37

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|10.9(c)  |  | Employment Agreement dated October 25, 1999, by and between Young Innovations, Inc. and Eric J. Stetzel.                    
|-------- |  | ----------------------------------------------------------------------------------------------------------------------------
|10.10(d) |  | Promissory Note dated August 7, 2000, in the amount of $500,000 payable by Alfred E. Brennan, Jr. to Young Innovations, Inc.
|10.11(d) |  | Employment Agreement dated July 25, 2000, by and between Young Innovations, Inc. and George E. Richmond.                    
|10.12(d) |  | Consulting Agreement dated January 8, 2001, by and between Young Innovations, Inc. and Richard G. Richmond.                 
|10.13(g) |  | Amendment to Richard G. Richmond Consulting Agreement dated November 19, 2001                                               
|10.14(g) |  | Stock Repurchase Agreement dated November 9, 2001, by and between the Registrant and George E. Richmond.                    
|10.15(g) |  | Form of the Registrant's Restricted Stock Award Agreement with schedule of grantees.                                        
|21(g)    |  | Subsidiaries of the Registrant                                                                                              
|23(g)    |  | Consent of Arthur Andersen LLP                                                                                              
|24       |  | Power of Attorney (included on Signature page)                                                                              
|99.1(g)  |  | Letter to the Securities and Exchange Commission from the Registrant regarding Arthur Andersen LLP.                         

---

(b)
Reports on Form 8-K. None.

(c)
See the exhibit index for the exhibits filed as part of or incorporated by reference in this report.

38

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Dated:
March 22, 2002

| |  | YOUNG INNOVATIONS, INC.
| |  | -----------------------
| |  | By:                    

Each
person whose signature appears below constitutes and appoints George E. Richmond and Alfred E. Brennan his true and lawful attorneys-in-fact and agents, each acting alone, with full
powers of substitution and re-substitution for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this report, and to file the same with
all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, each acting alone, full power and
authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents, each acting alone, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on
the dates indicated.

|Signature                                     |  | Title                                                                                                                                 |  | Date          
|--------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------- |  | --------------
|                                              |  |                                                                                                                                       |  |               
|/s/GEORGE E. RICHMONDGeorge E. Richmond       |  | Director                                                                                                                              |  | March 22, 2002
|/s/ALFRED E. BRENNANAlfred E. Brennan         |  | President, Chief Executive Officer, Director (Principal Executive Officer)                                                            |  | March 22, 2002
|/s/ARTHUR L. HERBST, JR.Arthur L. Herbst, Jr. |  | Executive Vice President, Chief Financial Officer, Secretary, Director (Principal Financial Officer and Principal Accounting Officer) |  | March 22, 2002
|/s/RICHARD G. RICHMONDRichard G. Richmond     |  | Director                                                                                                                              |  | March 22, 2002
|/s/RICHARD P. CONERLYRichard P. Conerly       |  | Director                                                                                                                              |  | March 22, 2002
|/s/CONNIE H. DRISKOConnie H. Drisko           |  | Director                                                                                                                              |  | March 22, 2002
|/s/JAMES R. O'BRIENJames R. O'Brien           |  | Director                                                                                                                              |  | March 22, 2002
|/s/CRAIG E. LABARGECraig E. LaBarge           |  | Director                                                                                                                              |  | March 22, 2002
|/s/BRIAN F. BREMERBrian F. Bremer             |  | Director                                                                                                                              |  | March 22, 2002

39

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EXHIBIT INDEX

|Exhibit
Number |  | Description                                                                                                                                                                                                                
|-------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1(a)         |  | Articles of Incorporation of Registrant and Statement of Correction                                                                                                                                                        
|3.2(g)         |  | Amended and Restated By-Laws of Registrant                                                                                                                                                                                 
|4.1(e)         |  | Credit Facilities Agreement among Bank of America, N.A., the other lenders listed therein and Young Innovations, Inc. dated March 20, 2001 (the "Credit Agreement")                                                        
|4.2(e)         |  | Amendment No. 1 to the Credit Agreement dated April 20, 2001                                                                                                                                                               
|4.2(f)         |  | Amendment No. 2 to the Credit Agreement dated September 28, 2001                                                                                                                                                           
|10.1(a)        |  | Escrow Agreement dated May 4, 1995 among Young Dental Manufacturing Company, Chemical Venture Capital Associates, P. Jeffrey Leck, John F. Kirtley, Richard C. Nemanick, Lorvic Holdings, Inc. and Boatmen's Trust Company.
|10.2(a)        |  | Contingent Payment Agreement dated as of May 4, 1995, by and between Young Dental Manufacturing Company, The Richard C. Nemanick Trust and Boatmen's Trust Company.                                                        
|10.3(a)        |  | Young Dental Manufacturing Company Pension Bonus Plan dated as of April 12, 1983.                                                                                                                                          
|10.4(a)        |  | Young Dental Manufacturing Company Profit Sharing Plan dated as of January 1, 1987.                                                                                                                                        
|10.5(g)        |  | Amended and Restated 1997 Stock Option Plan of the Registrant.                                                                                                                                                             
|10.6(c)        |  | Employment Agreement dated October 1, 1999, by and between Young Innovations, Inc. and Alfred E. Brennan, Jr. (revised from agreement dated October 8, 1997)                                                               
|10.7(b)        |  | Asset Purchase and Sale Agreement dated February 16, 1998 between Registrant and Panoramic Corporation.                                                                                                                    
|10.8(c)        |  | Employment Agreement dated July 6, 1999, by and between Young Innovations, Inc. and Arthur L. Herbst, Jr.                                                                                                                  
|10.9(c)        |  | Employment Agreement dated October 25, 1999, by and between Young Innovations, Inc. and Eric J. Stetzel.                                                                                                                   
|10.10(d)       |  | Promissory Note dated August 7, 2000, in the amount of $500,000 payable by Alfred E. Brennan, Jr. to Young Innovations, Inc.                                                                                               
|10.11(d)       |  | Employment Agreement dated July 25, 2000, by and between Young Innovations, Inc. and George E. Richmond.                                                                                                                   
|10.12(d)       |  | Consulting Agreement dated January 8, 2001, by and between Young Innovations, Inc. and Richard G. Richmond.                                                                                                                
|10.13(g)       |  | Amendment to Richard G. Richmond Consulting Agreement dated November 19, 2001                                                                                                                                              
|10.14(g)       |  | Stock Repurchase Agreement dated November 9, 2001, by and between the Registrant and George E. Richmond.                                                                                                                   
|10.15(g)       |  | Form of the Registrant's Restricted Stock Award Agreement with schedule of grantees.                                                                                                                                       
|21(g)          |  | Subsidiaries of the Registrant                                                                                                                                                                                             
|23(g)          |  | Consent of Arthur Andersen LLP                                                                                                                                                                                             
|24             |  | Power of Attorney (included on Signature page)                                                                                                                                                                             
|               |  |                                                                                                                                                                                                                            

40

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|99.1(g) |  | Letter to the Securities and Exchange Commission from the Registrant regarding Arthur Andersen LLP.
|------- |  | ---------------------------------------------------------------------------------------------------

---

41

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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To
Young Innovations, Inc.:

We
have audited in accordance with auditing standards generally accepted in the United States, the consolidated financial statements of Young Innovations, Inc. and subsidiaries
included in this Form 10-K Annual Report and have issued our report thereon dated February 4, 2002 (except with respect to the matter discussed in Note 22, as to which
the date is March 22, 2002). Our audits were made for the purpose of forming an opinion on those statements taken as a whole. Schedule II included in this Form 10-K
Annual Report is the responsibility of the Company's management and is presented for the purpose of complying with the Securities and Exchange Commission's rules and is not part of the basic financial
statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly states in all material respects the
financial data required to be set forth therein in relation to the basic financial statements taken as a whole.

ARTHUR
ANDERSEN LLP

Chicago,
Illinois
February 4, 2002 (except with respect to the matter discussed in Note 22, as to which the date is March 22, 2002)

42

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YOUNG INNOVATIONS, INC.

SCHEDULE IIVALUATION AND QUALIFYING ACCOUNTS  YEARS ENDED DECEMBER 31, 1999, 2000, and 2001  (IN THOUSANDS)

|                                   |  |   |     | ADDITIONS |   |     |   |  
|---------------------------------- |  | - | --- | --------- | - | --- | - | -
|
|Allowance for doubtful Receivables |  |   |     |           |   |     |   |  
|1999                               |  | $ | 184 |           | $ | 126 |   | $
|2000                               |  |   | 228 |           |   | (25 | ) |  
|2001                               |  |   | 220 |           |   | 51  |   |  

43

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